Annuities✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
A primary advantage of naming a beneficiary on an annuity contract rather than leaving the proceeds to the estate is that:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A named beneficiary on an annuity contract receives the proceeds directly under the contract's beneficiary designation, bypassing the probate process. Probate is the court-supervised administration of a decedent's estate; assets that pass by contract, such as annuity proceeds with a designated beneficiary, transfer directly and are not part of the probate estate. This is one of the key planning advantages of annuities and life insurance in an estate plan.
Why the other options are wrong
- B) The proceeds may still be included in the owner's gross estate for federal estate tax purposes; designation does not reduce the estate value.
- C) A beneficiary receives the remaining proceeds, not necessarily lifetime income; lifetime income is the annuitant's payment stream.
- D) The insurer must still pay the proceeds; designation only directs where the payment goes and does not cancel the obligation.
Memory hook
Named beneficiary = express lane past probate court; estate = the slow, public, court-supervised line.